Posted!

Join the Conversation

Comments

Welcome to our new and improved comments, which are for subscribers only.
This is a test to see whether we can improve the experience for you.
You do not need a Facebook profile to participate.

You will need to register before adding a comment.
Typed comments will be lost if you are not logged in.

Please be polite.
It's OK to disagree with someone's ideas, but personal attacks, insults, threats, hate speech, advocating violence and other violations can result in a ban.
If you see comments in violation of our community guidelines, please report them.

Two men admit to toner fraud that prosecutors claim cost Xerox $21 million

Defense lawyers say the amount of loss alleged by prosecutors is significantly greater than the actual fraud. Fittingly, since the cheated company was the printing giant Xerox, the question of the scope of the fraud will hinge on the price of toner materials.

On Friday, Kyle Haynes and Bryan Day both pleaded guilty to conspiracy to commit mail and wire fraud and also to filing false tax returns. The two were earlier indicted, along with three other men, and accused of the criminal conspiracy.

The debate over the size of the fraud — and the value of toner — will be quite meaningful for Haynes and Day, as a federal judge's ruling on the question could trim years off their ultimate sentences.

According to the plea agreements and Assistant U.S. Attorney Richard Resnick, the scheme worked like this:

• Haynes, Day and others created the Florida-based company, HDH Graphics, which also went by the name Aldar Securities. The entities were "sham" printing companies, prosecutors say.

• Xerox sold and leased equipment to a middle man, Florida resident Robert Lee Fisher, who then resold or leased equipment to HDH and Aldar. Those companies, known as "end use customers," were not permitted to resell the equipment. Instead, they were expected to pay Xerox based on the number of prints they sold.

• From 2008 through June 2013 the accused lied about how much toner was being used by the companies, claiming that they had made 38.5 million prints. They instead sold the Xerox toner the companies had received to others.

• Xerox maintains that the retail value of the goods was $24.8 million. The plea agreement says the accused and Fisher, who is still facing charges, sold the materials for more than $11 million.

On Friday, Haynes and Day both also admitted to filing false tax returns, and each agreed to repay the government more than $20,000.

The conspiracy crime, however, is the more pressing matter for the two men.

Under the government calculations, the recommended sentence for the two will be 63 to 78 months in prison. Their attorneys say that the fraud amount should not be based on the alleged retail value cited by Xerox, and plan to argue at sentencing that the scope of the crime was significantly less — a difference that could trim as much as two years off the sentences.

Also on Friday, another of the men originally accused in the conspiracy — David Haynes — admitted to filing false tax returns and agreed to pay the government about $17,000. He could face six months to a year in prison under the federal sentencing guidelines, which are recommendations and not mandates.

Still facing charges are Fisher and Jason Haynes. Jason Haynes and Kyle Haynes are brothers; David Haynes is their father.